BUDGET 2026-27: Senate panel backs 5pc tax on earnings from social media

• Govt signals gradual end to super tax
• State minister says target of bringing 3.5m retailers into tax net in one year ‘unrealistic’
• NA panel seeks detailed estimates of revenue generation, relief measures to assess their overall economic impact

ISLAMABAD: A parliamentary committee on Monday approved a five per cent tax on earnings generated through social media platforms by both local and foreign digital content creators, as lawmakers continued their review of proposals under the Finance Bill 2026.

The move reflects the growing significance of social media as a source of income, with digital platforms increasingly serving as lucrative business avenues rather than merely communication tools. Content creators, influencers and online entrepreneurs are now generating millions of rupees annually through platform monetisation, advertising revenue and audience engagement.

The Senate Standing Commi­ttee on Finance, chaired by Senator Saleem Mandviwalla, reviewed the proposed taxation framework and endorsed the mechanism for bringing social media earnings into the tax net. Finance Minister Muhammad Aurangzeb and Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial briefed the committee on the bill’s provisions.

Separately, the National Assembly Standing Committee on Finance in its meeting, headed by MNA Naveed Qamar, directed the finance ministry and FBR to submit detailed estimates of revenue generation and relief measures to assess their overall economic impact.

The proposed tax on social media income sparked debate am­ong committee members, with some expressing concerns that additional taxation could dis­co­urage foreign exchange inflows.

Senator Saleem Mandviwalla warned that higher taxes might reduce incentives for digital earners to bring income into Pakistan. Senator Abdul Qadir echoed similar concerns, arguing that individuals earning through overseas digital platforms should be encouraged rather than burdened with excessive taxation.

Responding to the criticism, the FBR chairman said social media earnings should be treated like any other taxable income. FBR officials informed the committee that annual social media income of up to Rs600,000 would remain exempt. Earnings between Rs600,000 and Rs1.2 million would be subject to a five per cent tax under the proposed framework.

“We are simply asking for our share from social media income,” Mr Langrial told the committee.

During the proceedings, Finance Minister Muhammad Aurangzeb reiterated the government’s intention to gradually phase out the super tax. He said the policy direction was clear and that efforts would continue each year to reduce the levy before eventually abolishing it altogether.

Senator Abdul Qadir proposed raising the exemption threshold under the Finance Bill 2026 from Rs500 million to Rs1 billion. However, Mr Langrial opposed the proposal, warning that such a move would create a revenue shortfall of approximately Rs250 billion and necessitate additional taxation measures elsewhere. The proposal did not gain support from tax authorities.

Meanwhile, Minister of State for Finance Bilal Azhar Kayani informed the NA committee that the first six slabs of the super tax had already been eliminated. He added that fertiliser, banking and petroleum companies with incomes exceeding Rs500 million would continue to face a 10pc super tax, while other sectors above the same threshold would remain subject to an 8pc levy.

Retail tax scheme draws criticism

The NA committee also discussed the government’s proposed trader ta­­x­­ation scheme, which faced criticism from several lawmakers, while the sta­­­­­te minister defended the initiative.

Committee chairman Naveed Qamar remarked sarcastically that those responsible for designing the retail scheme deserved “special awards”, reflecting concerns over its structure and implementation.

Kayani argued it would be unrealistic to bring all 3.5m shopkeepers into the tax net within a year. He said the proposal had been developed after consultations with trader associations and retailer groups.

FBR Member Hamid Ateeq Sarwar noted that while Pakistan has around 4.4m commercial power connections, only 400,000 businesses are currently registered with the tax authority. The scheme initially aims to bring 100,000 large retailers into the documented economy, he said. Sarwar added shopkeepers owning significant assets, such as plots or luxury vehicles, could be selected for audit under the proposed system.

Export sector, other tax measures

The committees also examined proposals affecting exporters and other sectors of the economy.

Sarwar informed lawmakers that the government had proposed reducing the advance tax rate for exporters from 2pc to 1.25pc. He also stated that Pakistan and Bangladesh remain among the few countries operating a final tax regime, noting that the system is generally not recognised under IMF frameworks. The FBR chairman opposed suggestions to restore the final tax regime for exporters.

On sales tax measures, officials clarified that the inclusion of 19 additional items in Schedule III of the Sales Tax Act would not increase tax rates. Instead, manufacturers would simply be required to clearly display prices and applicable taxes on products. Officials added that all packaged goods fall within the scope of Schedule III.

The committee was also informed that the so-called “pink tax” had be­­­­­­­­­en reduced from 18pc to zero. Following objections from lawmakers ov­­­­­­er the term itself, officials indicated that the name would be changed.

Insurance, inheritance

The Senate committee approved a proposal to tax only the profit component of life insurance policies from Tax Year 2026, while keeping the principal amount exempt. Insurance payouts related to death, disability and policies maturing after seven years would remain tax-free.

Lawmakers also endorsed the continuation of sales tax exemptions for property transfers resulting from inheritance following the death of parents. No tax will apply to inheritance-related divisions or valuation adjustments under the proposed framework.

In a separate briefing, officials revealed that data analysis had identified approximately 8,697 individuals holding deposits worth nearly Rs750 billion despite not paying inc­ome tax. The findings were cited as evidence of the need to broaden the tax base and improve compliance.

While directing the finance ministry and FBR to submit detailed fiscal impact assessments and implementation plans before further deliberations on the Finance Bill 2026, Mr Qamar highlighted that tax relief measures should remain fair and consistent with efforts to expand the country’s tax net.

Published in Dawn, June 16th, 2026 ...